I mean, you could delegate the scaling to the startups you're investing in.
If I'm gambling at the horse races, should I bet $100 on every horse to make my gambling scalable and diversified, because I don't feel I can pick winners with any reliability?
In the economy as a whole how many people are even business owners? Most people go to work and price take at their job without negotiating, without even moving area, without even studying, etc.
You also have multi-company-monopoly effects for lack of a better term, e.g. if there are 10 competitors that make semiconductors - _everyone_ needs semiconductors, then if you pick the appropriate balance and don't buy in at an overvalued time you can invest in all ten and still make money because there is a net flow of funds into the system from outside of it.
Using your logic, if it was so easy why didn’t Google stop OpenAI? Meta? Perplexity?
Very unlikely
Because hubris.
One glaring flaw of well-capitalized large tech (perhaps the only one) is thinking they can build something better internally, when they have enough cash to simply buy best of breed off the market.
At times Google understood this: Android 2005, YouTube 2006, Writely/GoogleDocs 2006, DoubleClick 2007, Motorola Mobility 2012, Waze 2013, DeepMind 2014
e.g. Microsoft circa 2000 didn't think they could build a better internet. They just thought that the internet didn't really matter that much. Google in 2022 knew that LLMs mattered, and had spent a ton of money, but OpenAI just got a better product to market faster.
YC did do the right thing (investing in super early stage startups) at the right time (ZIRP environment), but now with the proliferation of too many startups and applicants, I'm not so certain on how much of a future it has with getting the next best thing. Already seeing quite a few startups that either bootstrapped or raised without YC, while a number of YC companies are stuck in pivot loops.
The real killer here is the Bay Area housing market. You need those RSUs to pay for a place to stay.
Especially as SF real estate relies on NIMBYism that might change whereas FAANG relies on an enormous brain trust, branding and monopolies.
Based on what I’ve read, this seems backwards, I think YC chooses founders with the most promise and gives their companies preferential treatment because promise is only the ability to do things.
But I could be wrong and probably am.
Yes YC acts in its interests but in my experience they live by good principles and that makes all the difference. The Chaos Monkeys anecdote is an example of that. So I don’t agree with the article’s framing that they throw their weight around to simply exercise whatever power they have over others for financial gain.
And knowing which companies are high quality is almost impossible at the early stages.
Keep in mind, YC is very early stage. Asking them to pick only winners based on an application and short interview process would be a fool's errand. I believe their acceptance rates tend to be around 2%, so it's not like they aren't being selective up front—it just takes time to really get signal on who is executing and finding traction. Startup investment is high risk and justified by the outliers, so they have every incentive to find them early, it only makes sense that they would give more support to their winners as they emerge.
Because they don't actually have the ability to pick high-quality companies.
If you don’t eat the pie, someone else will. If someone else eats more pie than you, they will be stronger than you and eat your pie.
Switching analogies, unless you have a defensible niche with a wide moat, your position of power is an unstable equilibrium; in the open market only a monopoly is a stable attractor state.
The Peter Principle is pointing out that if you keep getting promoted by doing an exceptional job, and you stop getting promoted when you stop, that you have ended up leaving a job you were exceptional at, and landing in a job you are not good at. In a certain sense it's saying "you should be demoted back to your last job that you were exceptional at"; it's not suggesting that, it's suggesting a sort of snarky "this whole system is set up to fail" because it's from a "isn't capitalism grubby" perspective.
None of this flavor is in the general YC scaling case, though you may be able to find it in various places within that.
I don’t think there’s any chance he saw any economic value in us, he took that time because he cared about startups and well-meaning failures like us
It’s a small thing, yes, but I’ve always thought it said a lot about him
If you happen to be in YC’s good graces, they will reward you in ways described in the article. If you’re not, they won’t take the time.
I was in YC in 2012 (2 yrs after the founder writing this article, and one of the last years PG was directly involved). By that time it was clear that YC had turned into a “spray and pray” accelerator, meaning they started favoring volume of investments over everything else.
When they did that, it also required that they split their attention between more companies, which inevitably meant that the sort of anecdotes described in the article still happen, but only for companies YC likes and believes in post-accelerator. YC definitely discriminates from that perspective- they choose which startups they think have the most promise during any given batch, and they give those founders preferential treatment.
Which is to be expected. How else can you scale an accelerator?